Raiden Network ICO Review & Analysis

Summary:

The current state of blockchains is one of unlimited potential but great speculation. Many companies have detailed roadmaps and passionate users anxiously awaiting solutions to industries from Supply Chain Management, Digital Identity, Financial Payments etc.…

For these solutions to truly change the world and for crypto companies to live up to their valuation the public blockchain must be able to match VISA level speeds and more. Raiden Network is one of the few solutions that promises to bring that scaling to Ethereum.

Already one of the most controversial and discussed ICO’s of the year, Raiden Network will be conducting its crowdsale on October 18th. What is Raiden and why should you care?

The Raiden network is an off-chain payment solution built on top of the Ethereum blockchain which promises to bring micropayments and payment channels to the growing number of decentralized apps that are currently in development. Think the lightning network of Bitcoin.

The Raiden Network is vital in creating a cryptocurrency ecosystem that supports microtransactions with instant confirmations and low fees through mobile and desktop solutions. The team behind Raiden Network claims they will be the solution to Ethereum scaling, but the true question is can they live up to the hype and will its (RDN) tokens be of any value.

What is Raiden Network?

The Raiden Network is an off-chain scaling solution, enabling near-instant, low-fee and scalable payments. It’s complementary to the Ethereum blockchain and works with any ERC20 compatible token. The Raiden project is work in progress. Its goal is to research state channel technology, define protocols and develop reference implementations.

Problem & Solution

The Raiden Network is a technology that leverages off-chain payment channel networks to address these substantial issues on the Ethereum blockchain:

Scalability

Blockchains do not scale well. Current public, permissionless blockchains are unable to achieve more than a low, fixed number of transactions per second. Ethereum has been shown to reach its cap at about 10 transactions per second. Short-term scaling solutions, like raising maximum computation performed per block by a constant factor, will not be able to support continued mainstream adoption.

The Raiden Network will provide a payment system based on payment channel technology that scales with the number of its users. This means that the bigger the Raiden Network becomes, the higher its maximum throughput will be, with practically no upper limit in sight.

Latency

Blockchains are slow. At the moment, Ethereum mines a new block approximately every 15 to 30 seconds. To reach practical finality of a transaction, confirmation times of several minutes have to be endured. This significantly degrades user experience and hinders mainstream adoption.

Raiden Network transfers are as fast as text messages. The moment you receive a signed Raiden transfer, you can be certain that you now hold the amount included in the transfer. There is no need to wait for any confirmations.

Transaction fees

Using blockchains is expensive. Once a blockchain hits its limit, paying high enough fees to be included in a block becomes a competitive endeavor, as is the case with Bitcoin today. Ethereum will be no different, eventually leading to even higher confirmation times and transaction fees on the order of a few dollars per transaction. For the vision of a global, decentralized, and dependable computer this is highly detrimental.

Raiden Network transfer fees will be several orders of magnitude lower than on-chain transaction fees. Instead of paying for global consensus, you only pay for forwarding peer-to-peer consensus. Low fees allow for a long tail of new use cases which have not been practical before due to high transaction costs. Especially IoT and the Machine-to-Machine economy depend on being able to transfer tiny values. Raiden aims to be the predominant payment layer for these applications.

Improving privacy

Ethereum transactions are public, whereas Raiden transfers will be private between the payer, the payee, and the nodes forwarding the transfer. When channels are settled, only the sum of transactions will become visible to the entire world.

Roadmap (Business & Technical)

Raiden currently consists of three independent projects: µRaiden, Raiden Network, and Raidos.

There is a working implementation of µRaiden, which will be deployed on the Ethereum main net shortly.

The Raiden Network is still in development. A developer preview will be released soon and allow Dapp developers to get a first impression of the API and the properties of the system, also enabling them to build prototypes that interact with the Raiden Ropsten-based test network. In its current state the technology is not ready for production use. Significant tooling and even changes to the core protocol still need to be developed.

Raidos is currently only in its planning phase and development has not been kicked off yet.

Strengths

A very hyped project that many in the community consider hand in hand with the vitality of the second largest cryptocurrency in the market. While Ethereum has a market cap of over $25 billion, it would not be surprising for that community to carry Raiden’s valuation into the hundreds of millions.

The Raiden Network development is a vital off-chain solution to blockchain scaling. By utilizing an off-chain solution, users can set up channels with others in the network and send transactions back and forth instantly in high volume until the transaction agreement is closed and settled on the Ethereum blockchain. Think of a bar tab on the Ethereum network. uRaiden (the micro payment channels built under the Raiden Network) expected to increase Ethererum’s network capacity to one million transactions per second compared to the single digit transactions per second that is currently possible.

Investment in the Raiden network does not only stem to off chain payment solutions as the development team aims to develop Raidos or Raiden 2.0. Raidos aims to scale Ethererum’s computation abilities through a network of satellite chains which will facilitate micro level smart contracts. This will be crucial in the scaling of decentralized applications (DAAPS).

Weaknesses

The very nature of the way Raiden works has the potential to develop into a more centralized solution than many would hope. How is it centralized? If two parties that know each other try to set up a chain, they will have no problem sending payments across. But if two parties try to create a payment channel that don’t directly know each other they must utilize a transaction hub which may have potential for influence of the network.

The Raiden Network roadmap has been delayed in the past and the team is behind schedule. The project has been delayed by over half a year and there is no exact communication of when they will be finished. An investment in Raiden is hoping they will not be experiencing any more delays.

Due to the inherent limitations of the network, Raiden is not the solution for large payments. Because the focus is on micropayments, any large payments increase the probability that the route for which the payment will travel across will not be relayed. The current recommendation is to conduct large transactions on chain but now there is no specific limit on at what point a transaction is considered large.

Holding a Dutch auction for its ICO crowdsale. Although this will allow the auction to enable everyone to participate because of the strong hype surrounded this network it is likely to raise a large amount of capital as the price of each tokens starts very high and slowly depreciates until the price multiplied by the number of offered tokens equals the total ETH amount sent to the auction.

Our Verdict:

The team behind the Raiden network is a company called BrainBot Technologies. Leading the team behind BrainBot is Heiko Hees who has experience as a core developer on Ethereum since March of 2014. With a very active GitHub repository showing consistent updates and clear project milestones the Raiden Network is an example of an open source project where there is true clarity into what is going on behind the scenes.

Although the team is strong and the idea of off scale payments with an on-chain settlement is sound, there are still concerns regarding how soon with Raiden be functional and if it was ethical switching to an ICO instead of getting funding from the Ethereum foundation / users being able to use Raiden for free.

Based on review of the platform and team we believe that although there are reasons to be skeptical, the Raiden network is a great platform to get involved in. In the short term this would not be a good coin to flip as the amount of market demand for Raiden will match exactly how much they raise and the price per token.

In the long term, it would not be surprising to see the Raiden Network with a top 10 or top 20 market cap based on community demand but we caution investors to contribute late in the crowdsale to see how much funds will be raised by crypto community.

It would not surprise us to see Raiden generate over $100 million in funds and a $200 million dollar marketcap but the larger the initial marketcap the less upside the platform has. The future of the Raiden Network is bright as it looks to be a core scaling solution to Ethereum and we believe investors will be happy long term to include RDN tokens in their crypto portfolio.

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About Us

We are fast becoming the authority hub for all ICO, Crypto and Blockchain news. Our mission is to help and bring accurate and transparent educational content on blockchain, crypto assets and ICO's to fellow crypto enthusiasts.